The New Maths on New Business: Why You Need to Double your Win Rate
In last week’s post, I referred to the likelihood that the RFP world is undergoing short-term and medium-term change caused by the COVID-19 pandemic. It’s likely you’ve already discovered this for your business.
In a quick survey among over a dozen of our clients plus consultants who advise on the RFP process, we see that three things are happening now and are expected to continue even when the situation becomes less severe:
Though some companies are pulling back on projects for the present, there’s still a lot of RFP activity.
In-person contact with decision-makers is just about completely eliminated.
The evaluation process clients are using to sort through proposals is changing.
I’d like to directly address the first of these new conditions. And, in the process, I hope to light a fire under pursuit team leaders to consider changing the way you are doing things, right now.
Why Fewer RFPs?
This is a question with an obvious and a not-quite-as-obvious answer.
The obvious – some businesses must retrench. They have to conserve cash. So expensive, or even the less expensive but not urgent projects, will be put on hold.
The less obvious – RFPs that are issued will go to fewer potential providers than before. We’re picking up definite indications that this has started. With money tighter, if a project is put out to bid, the originating company wants to be 100% certain that the project will be done well and on budget. Some will feel they can’t take as big a chance on hiring an outlying firm, even if that firm might’ve been given serious consideration in normal times. So, for you the firm in pursuit of the business, the RFP might be out there, but you’re not being invited to pursue.
One more consideration: For those RFPs that are issued, in a world where budget is now tight, companies will be looking to spend less on each project that they put out to bid. For the pursuing firms, it means the likelihood you’ll be pressured into lower fees and maybe lower margins.
The New Maths: Wins and Losses Matter More
So here you are. You’re receiving some RFPs, you have some projects to pursue pre-RFP, but not as many of both as you usually do. That means every win and loss matters more.
Let’s say you’ve been happy with a conversion rate that’s historically around 30%. You typically submit five proposals a month, or 60 a year, converting 18. And let’s say each win has been worth an average of $1,000,000 in fees.
Here comes the new normal. You’re now looking at 30 opportunities a year. A 50% reduction. Are you confident you can win 18 of 30 (60%) when historically your win rate has been half of that? And maybe the value of the 18 wins is now reduced by 20% in revenue and profit. To meet your new business target, even if you’re winning 60% of the time, you have to make up a $3.6M shortfall in revenue. Take it another step: To make up that revenue gap, you have to win four or five more pursuits out of those 30 available. Now you’re talking about winning 22 out of 30, or a conversation rate of 73%. And that’s from a historical rate of 30%.
You Must Do Something Different
Most pursuit teams can’t expect to double their conversion rate just because they have to. Teams must consider major changes to how they pursue new business and respond to RFPs. Change can come anywhere in the business development cycle:
Do a much better job pre-RFP, even in this virtual world.Get into more pitches.Be considered the favorite more often. Spend time building relationships with your prospects.
Use the fact that there are fewer RFPS to your advantage.With more time available, pursue the ones that come your way with more intensity, passion and commitment.
Don’t rely on the brilliance of your solution to carry the day.When money is tight and clients have concerns about the wisdom of their choices, TRUST matters more than ever.Be the firm they really trust.
Next week we’ll look more at this third point and other factors that are changing how prospects are now making decisions.
- Bob Wiesner, Managing Partner, Americas